Allowed

P Chandirakala v. Karnataka Bank Limited

DRT21 Oct 2024SA/576/2023

Case brief

AI extract

What is this about?

The Tribunal allowed an application filed under Section 17 of the SARFAESI Act by loan defaulters to set aside a bank's sale notice and auction proceedings. The court found procedural violations regarding valuation, newspaper publication, and notice affixture under the Security Interest (Enforcement) Rules, rendering the sale illegal.

What did the court decide?

Sale notice and auction proceedings set aside; sale certificate cancelled; auction purchaser refunded sale consideration with 4% interest; bank expenditure added to loan account rejected.

P Chandirakala versus Karnataka Bank Limited — Banking and Recovery | DRT (2024)

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SA No.576/2023

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FAIR ORDER

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IN THE DEBTS RECOVERY TRIBUNAL AT MADURAI

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DATED THIS 21^st DAY OF OCTOBER, 2024

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PRESENT: SEEMA SINHA

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[PR. DISTRICT & SESSIONS JUDGE - Retd] PRESIDING OFFICER

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SA No.576/2023

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Mrs. P. Chandirakala, W/o. Selvaraj

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No. 6-53A, Kovalam Road,

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Kanyakumari District.

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Mr. N. Selvaraj, S/o. Narayanaperumal,

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No. 6-53A, Kovalam Road, Kanyakumari, Kanyakumari District. …Petitioner/Applicants -Vs-

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The Authorized Officer Karnataka Bank Ltd., Asset Recovery Management Branch, Chennai-600 001.

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The Branch Manager, Karnataka Bank Ltd., Nagercoil Branch, Kanyakumari District.

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Mr. Suresh, S/o. Chelladurai No. 4/414, Panchayat Street, Avaraikulam, Palavoor, Tirunelveli-627 133. …Defendants / Respondents

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SA No.576/2023

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Appearance of Advocates: Mr. Arun Murugan - Counsel for the Applicants Mr. N.S. Karthikeyan Counsel for the Defendant Bank (D1) Mr. S. Suresh - Counsel for the Defendant-3

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This SARFAESI Application was heard in the presence of Shri M. Arun Murugan, Counsel for the Applicant and Shri N.S. Karthikeyan, Counsel for Defendant Bank (D-1) & Shri S. Suresh, Counsel for Defendant-3 (Auction Purchaser) and fixed for passing final order before me and upon hearing the arguments of the Counsels and having stood over for consideration till this day, this Tribunal delivered the following:

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O R D E R

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1 . This application has been filed under Sec.17 of the SARFAESI Act 2002 by the Applicants praying therein to set aside the sale notice dated 24.03.2023 and subsequent auction sale proceedings dated 18.04.2023 and all further proceedings on the grounds of irregularity.

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2 . The brief averments of the Application filed by the Applicants are as follows:-

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The applicants stated that the applicants have availed loan facility from the 2nd Defendant bank to the tune of Rs. 15,24,000/- for business purposes and mortgaged their residential house property as collateral security. The applicants were paying the loan dues regularly, however there was some default. So, the applicants cannot be termed as willful defaulters. It is further stated that they have paid around Rs. 7,00,000/- till date to the loan account. The applicants have two sons and they pursued their higher

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studies, due to which the applicant could not mobilize resources to repay some dues.

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Further, Applicants submitted that, to his utter shock and surprise the 1^st Defendant straightway issued a sale notice dated 18.07.2022 fixing the sale on 24.08.2022 at 11.30 am for the recovery of Rs. 19,85,828.87/-. It is pertinent to mention that before issuing the sale notice, neither a demand notice was issued nor a possession notice was issued as contemplated under the act and rules. The Defendant cannot issue any sale notice without complying with sections 13(2) and 13(4) of the Act.

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Further, Applicant submitted that being aggrieved by the said sale notice the 2^nd applicant had filed a writ petition in W.P. (MD) No. 19368 of 2022 before the Hon’ble Madurai Bench of Madras High Court. The Hon’ble High Court was pleased to grant an interim stay of all further proceeding with a direction that the petitioner will pay a sum of Rs. 1,25,000/within a period of two weeks and same was complied on 06.09.2022 by the Applicants.

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Further, Applicant submitted that, when the said writ petition came up for hearing on 23.01.2023, the counsel appearing for the Defendant bank had knowingly made a false representation before the Hon’ble High Court that the applicant had not paid the aforesaid amount till now, recording the said submission the court had disposed of the writ petition by issuing further conditions directing the petitioner to pay a

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sum of Rs. 3,75,000/- on or before 24.02.2023 and a like sum on or before 24.03.2023 and 24.04.2023.

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Further, applicants stated that, even though conditional order complied by the Applicants, the writ petition was disposed off without going in to the merits of the case only because the bank through its counsel had made a false statement before the Hon’ble High court stating that the applicants had not paid the conditional amount till 23.01.2023 when the case came up for hearing. Taking advantage of such further conditions the Defendant issued the impugned sale notice dated 24.03.2023 fixing the sale on 18.04.2023 at 11 a.m for recovery of Rs. 20,55,389.87/- as on 22.03.2023, without taking into account the amount paid by the applicant.

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Further, Applicant submitted that the applicant had paid a further sum of Rs. 2,40,000/- to the loan account on 15.04.2023 and a further sum of Rs. 90,000/- on 17.04.2023 and a further sum of Rs. 20,000/- on 18.04.2023 and also filed a petition in W.M.P. (MD) No.6820 of 2023 in W.P.(MD)No.19368 of 2022 seeking extension of time for complying with the conditional order, however the Hon’ble high court was pleased to dispose of the said petition on 19.04.2023 directing the petitioner to approach Debt Recovery Tribunal as the Defendant bank produced a sale confirmation letter.

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Further, Applicants submitted that the 2nd applicant filed another writ petition in W.P.(MD) No. 10463 of 2023 challenging the auction and the confirmation letter and produced the Demand Draft dated 26.04.2023 for the balance

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outstanding amount of Rs. 15,00,000/-. The said case came up for admission the court reiterated its earlier direction dated 19.04.2023 and again directed the petitioner to approach Debt Recovery Tribunal.

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The applicant states that the 3^rd Defendant had not paid the entire sale amount till date. The Defendant bank had provided him time till 04.05.2023 for paying the said amount. Further, it is submitted that, the auction concluded by defendants 1 and 2 in favour of the 3^rd defendant is illegal and arbitrary. It is submitted that the confirmation of sale violates equity, good conscience and the terms of sale notice. The property is undervalued. The 3^rd defendant was the only participant and he was fixed as the purchaser even prior to the auction. The Auction was only an eyewash. The impugned sale notice dated 24.03.2023 and the subsequent auction sale proceedings dated 18.04.2023 and the consequential sale confirmation letter dated 19.04.2023 issued by the 1^st defendant are challenged.

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Main grounds of the Application:

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(i) The impugned sale notice dated 24.03.2023 and the subsequent auction sale proceedings dated 18.04.2023 and the consequential sale confirmation letter dated 19.04.2023 issued by the 1st defendant are all illegal, arbitrary and liable to be set aside.

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(ii) The powers vested in the 1^st defendant has not been judicially exercised and the impugned proceedings suffer with malafied intention and are liable to be set aside.

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(iii) The Defendant bank despite having received the condition amount paid by the applicant on 06.09.2022 and knowing very well that the order dated 23.08.2022 was complied with, made a false submission before the high court stating that the applicant had not complied with the condition till January 2023, only because of such false statement made by the bank further condition was imposed and based on its violation, the impugned sale notice came to be issued. Had such a false statement not be made, the applicant would have had the benefit of stay.

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(iv) The 1st defendant had failed to issue a proper and valid Demand Notice, Possession notice as contemplated under the Act and Rules. The possession notice was also not affixed in the conspicuous part of the property.

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(v) The applicants have not been issued clear 30 days notice. The notices have also not been published in the two leading newspapers, in the locality, within the prescribed time, as stipulated under the Act and rules and the same was also not affixed in the conspicuous part of the property as mandated. The mandatory provision under rule 8(7) of the Security Interest (Enforcement) Rules, 2002 was not adhered too. Hence the impugned proceedings are unsustainable in law.

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(vi) The defendant bank had not taken into account the amount paid by the petitioner of Rs.19,75,000/-.

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(vii) The Auction is liable to be set aside as the auction notice dated 24.03.2023 is not issued in compliance

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with Rule 8 and 9 of the Security Interest (Enforcement) Rules. The said sale notice does not contain the necessary particulars including the schedule of properties.

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(viii) The property is grossly undervalued. The upset price is fixed arbitrarily without complying with rule 8(5). The property is claimed to have been sold for a through away price by keeping Rs. 65,30,000/- over and above the upset price, which itself was fixed on the lesser side. The Market value of the property is more than Rs.30 Lakhs. The defendants have not valued the property as contemplated under the Act and Rules.

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(ix) The confirmation of sale is illegal. The 3rd Defendant had not paid the 25% of the bid amount on 18.04.2023.

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(x) The Defendant have failed to issue copy of the sale proceedings despite repeated demands by the applicant. Thereby they are illegally trying to prevent the applicant for seeking recourse under the Act.

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(xi) The sense of great urgency shown by the defendants in conforming the sale on 19.04.2023 itself, only makes the applicant to believe that the defendants are trying to secure the property in favour of the 3rd defendant at any cost. The entire auction proceedings are violation of the act and rules.

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(xii) The sale proceedings were not conducted in a free and fair manner with a view to obtain the best possible price, 1^st defendant had acted as an agent of the 3^rd defendant.

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(xiii) The alleged sale was conducted in favour of the 3rd defendant and the sale proceedings are illegal and arbitrary not in accordance with the act and rules, it could not be treated as an auction.

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For the aforesaid reasons, the applicant prayed for:

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a) To set aside the impugned sale notice dated 24.03.2023 and the subsequent auction sale proceedings dated 18.04.2023.

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b) To set aside the sale confirmation letter and the sale certificate issued by the 1st defendant in favour of the 3rd defendant as illegal, and

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c) To hold the entire proceedings initiated under the SARFAESI Act as malafide, fraudulent and illegal and quash the same and

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d) To declare the order passed by the CJM as null and void and

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e) To Direct the Defendant to pay cost of this application; and

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f) To pass such further or other orders as this Hon’ble Tribunal may deem fit and proper in the circumstances of the case and thus render justice.

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Schedule of Property:

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All that part and parcel of immovable property measuring 5 cents, in Old S. No. 14526, Rs. No. 597/10 (Now the SubDivision RS No. 597/10B) with building constructed thereon bearing No. 6/53A1, 6/53A2, and 6/53C situated at Kanyakumari village and town panchayath, near to St. Michale Church and beside sea world Hotel, within the Kottaram SRO,

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SA No.576/2023

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Agasteeswaram Taluk, Kanyakumari Belonging to Mrs. P. Chandirakala and N. Selvaraj.

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Boundaries of property:

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East: Pathway

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West: The remaining property of the seller

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North: The remaining property of the seller

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South: Kovalam Road

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Typed Set of Papers filed by the Applicant

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S.No	Date	Description
1	27.04.2023	SARFAESI Application
2	18.07.2022	Sale Notice
3	18.08.2022	Affidavit and Petition in W.P.(MD)No.19368 of2022
4	23.08.2022	Interim Order in WMP No.14135 of 2022 in WP(MD) No. 19368 of 2022
5	06.09.2022	Receipt issued by 2nd Defendant
6	23.01.2023	Order in WP(MD) No. 19368 of 2022
7	24.03.2023	Impugned SaleNotice
8	15.04.2023	Demand Drafts
9	19.04.2023	Impunged sale Confirmation issued by 1st defendant in favour ofthe 3rd defendant
10	25.04.2023	Affidavit and petition in WP(MD) No.10463 of 2023
11	26.04.2023	Demand draft
12	20.10.2023	Dates and Events
13	20.10.2023	Supporting Affidavit filed by the Applicant
14	27.04.2023	Order in W.P.(MD)No.10463 of 2023
15	02.05.2023	Grounds of CRP (MD) No. 1213 of 2023
16	04.05.2023	Oder of interim stay in CMP(MD) No.5894of2023in

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		CRP(MD)No.1213 of 2023 restraining the bank from taking possession
17	04.05.2023	Sale Certificate issued by the Bank infavour of Defendant No. 3.
18	08.05.2023	Proof of Payment and compliance of the order passed by the High Court.
19	18.07.2023	Case status particulars of Crk.M.P.No.11172 of 2023 on the file CJM, Nagercoil
20	05.09.2023	Order in CRL.M.P.No.111172 of 2023
21	03.10.2023	Order in CRP(MD) No,1213 of 2023
22	10.10.2023	Notice issued by the Advocate commissioner

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3. On the other hand, the defendant Bank appeared and filed their Reply Statement /Written Arguments along with type set of paper.

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D/B filed Reply statement on behalf of 2^nd defendant also and submitted that, the present appeal filed by the appellant is not maintainable either in law or on facts. The appellants have suppressed many material facts before this Hon’ble Tribunal in filing the present appeal. As the appellants have committed default in repayment of the loan amount due to the bank, the bank has initiated proceedings under SARFAESI Act by issuing notice under section 13 of the said Act on 08.11.2017 and possession notice on 02.08.2018. But the actual sale was conducted only on 18.04.2023 after 5½ years of legal proceedings. Further, it is submitted that, the appellants have now challenged the sale notice dated 24.03.2023 and sale confirmation dated 19.04.2023. Further, the sale certificate was issued to the 3^rd defendant was registered on 04.05.2023 before the office of the Kottaram Sub Registrar Office,

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Kanyakumari District in Doc.No.2148/2023. The 2nd appellant has earlier challenged the e-auction sale notice dated 18.07.2022 before the Hon’ble Madurai Bench of Madras High Court on various grounds in W.P(MD)No. 19368/2022. The Hon’ble High Court on 23.08.2022 has passed the conditional order for the payment of Rs.1,25,000/- which was not complied by the Appellants within time frame. Further, D/B stated that, the said order was passed on 23.08.2022 and the payment should be made on or before 05.09.2022 i.e., within two weeks from 23.08.2022. But the appellants have made payment of that amount only on 06.09.2022 i.e., after the expiry of the time granted by the Hon’ble High Court. Moreover, they have not served and filed any compliance memo before the Hon’ble High Court. Thereafter the said matter came up for orders on 23.01.2023, when the matter was heard by the Hon’ble High Court it was reported that the appellants have not paid the amount as directed by the court in the order dated 23.08.2022. But it was recorded that appellants herein have not paid the said amount till now. Despite the same the Hon’ble High Court has considered the other submissions of both the counsels and passed another order with a condition that, the petitioner is directed to pay a sum of Rs.3,75,000/- to the respondent Bank on or before 24.02.2023, a sum of Rs.3,75,000/- to the respondent Bank on or before 24.03.2023 and further a sum of Rs.3,75,000/- to the respondent Bank on or before 24.04.2023. Till such time, no coercive steps shall be taken by the respondent. If the petitioner fails to pay the amount in any one of the installments, the respondent Bank may proceed further in accordance with law. Further, it is open

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to the petitioner to approach the respondent Bank under One Time Settlement scheme.”

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Further, Applicant had not paid the remaining outstanding dues, as per the order of the Hon’ble High Court and D/B has not taken any steps from 23.08.2022 to 24.02.2023 for almost six months. On failure on the part of the appellants to pay the conditional amount as undertaken by them in three instalments, the bank has initiated further proceedings to call for 2^nd auction sale notice on 24.03.2023. After the issuance of 2nd auction sale notice the 2nd appellant herein has filed an application for extension of time for making payment of the amount mentioned in the Hon’ble High Court order dated 23.01.2023. I respectfully submit that the appellants have suppressed the said application filed by them in W.M.P(MD)No.6820 OF 2023 in W.P.(MD)No.19368 of 2022 and its order dated 19.04.2023 before this Hon’ble Tribunal. Hon’ble High Court has dismissed the extension petition and property was sold on 18.04.2023 and sale also confirmed on 19.04.2023 and it would affect the 3^rd party purchaser rights, and hence dismissed.

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Further, Defendant Bank stated that, after dismissal of the extension petition and directions issued by the Hon’ble High Court dated 19.04.2023, the 2^nd appellant herein has filed another writ petition challenging the sale certificate dated 18.04.2023 and sale confirmation order dated 19.04.2023 in WP(MD) No. 10463 of 2023. The said writ petition was heard on 27.04.2023 and the Hon’ble High Court has directed to approach DRT.

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Again the 2nd appellant has approached the Hon’ble High Court by way of filing petition for extension of time application in W.M.P(MD) No. 6820 of 2023 in W.P(MD)No. 19368 of 2022 and the same was also dismissed by the Hon’ble High Court by recording the sale conducted on 18.04.2023 and confirmation of sale was also issued on 19.04.2023.

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Further, D/B submitted that, the sale certificate was registered on 04.05.2023 in Doc. No.2148/2023, before the office of the Kottaram Sub Registrar Office, Kanyakumari District. In the meantime, the appellants herein have filed C.R.P(MD)No.1213 of 2023 before the Hon’ble High Court and on 04.05.2023 the Hon’ble High Court upon admitting the C.R.P(MD)No. 1213 of 2023 with interim stay order taking physical possession of the property with a condition that, Rs.21 lakhs has to be deposit with the bank on or before 08.05.2023.

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Further, D/B has submitted that, as per the order of the Hon’ble High Court in the above C.R.P(MD) No.1213 of 2023 dated 04.05.2023 and after conducting the sale and registration of sale certificate, the appellants herein have rendered the various demand drafts on various dates to the 2nd defendant for the amount of Rs.21,00,000/- before 08.05.2023.

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Further, D/B has stated that, C.R.P (MD) No. 1213 of 2023 was allowed on 03.10.2023 by directing the Hon’ble Debt Recovery Tribunal, Madurai to take the SARFAESI Appeal on file and number the same and post the matter before the concern court for orders. Thereafter the present S.A was numbered.

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The Demand notice as per the SARFAESI Act was issued on 08.11.2017 and the same was acknowledged by them on 17.11.2017, but they pleaded that no demand notice was issued to them. Thereafter the possession Notice was also issued on 02.08.2018 and the same was published in The Hindu, English News Paper and Hindu Tamil News Paper on 04.08.2018 as per rules. The said possession Notice was also served on the appellants on 04.08.2028. Hence, the defendant Bank has followed all the rules without any deviation and the appellants have made bald allegations without any truth in it.

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Further, D/B submitted that, the property was sold in e- auction for a sum of Rs.65,30,000/- and the same was conducted as by following the rules and regulations stipulated in Security Interest (Enforcement) Rules and provisions of Securitization Act. The appellants have not raised any specific violation in conducting the 2^nd auction sale. SARFAESI proceedings was initiated in the year 2017 and the sale was conducted only in the year 2023 which clearly shows the attitude of the appellants in delaying the process by filing litigations one after another. It is very pertinent to note here that after the sale of the property and confirmation issued on 19.04.2023, the appellants have shown their alleged bonafideness by paying the amount of Rs.21,00,000/- after the sale was registered. Further, all the payments are made after completion of sale, hence the alleged payments made by the appellants are against their own documents and all are prepared only after the sale confirmation. Hence, it is proved that the appellants have not approached this Hon’ble Tribunal with clean hands.

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It clearly shows their intention to drag the proceedings of the defendant bank to exercise their right over the secured assets guaranteed under the provisions of SARFAESI Act.

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As per law the right of redemption of mortgage extinguishes once bank published auction notice. The said legal position was held by the Hon’ble Supreme Court in Celir llp Vs Bafna Motors (Mumbai pvt ltd.,) reported in 2023 Supreme (SC) 977, and also in 2023 SCC Online SC1209. The said legal position was also in conformity with Section 13(8) of SARFAESI Act. Further the 30 days notice period is not needed in failure to conduct sale as per 1^st notice was due to borrowers actions as held by the Hon’ble Supreme Court in S. Karthi Vs N. Subash Chand Jain reported in 2022 (10) SCC 641.

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Hence, no violation committed by the defendant bank in any of the express provisions of SARFAESI Act and Securitization Rules. As per law the appellants have no right to redeem the mortgage after 18.07.2022, when 1^st auction notice was issued against the secured assets and the appellants as per Section 13(8) of SAEFAESI Act.

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Hence, it is prayed that this Hon’ble Tribunal may be pleased to dismiss the S.A. No.576 of 2023 as devoid of merits and thus render justice .

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S.No	Date	Description
1.	08.11.2017	Demand notice u/s 13(2) of SARFAESI Act
2.	20.11.2017	Acknowledgment Cards
3.	02.08.2018	Possession Notice
4.	04.08.2018	Postal receipt
5.	09.08.2018	Acknowledgment Cards
6.	04.08.2018	TheHinduPaper Publication
7.	04.08.2018	The Hindu Tamil Thisai Paper Publication

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8.	23.08.2022	Interim order passed by WMP(MD).No. 14135/2022 in WP(MD).No.19368/2022
9.	23.01.2023	Final order passed by W.P (MD) No.19368/2022
10.	19.04.2023	Order passed by WMP(MD).No. 6820/2023 in WP(MD).No.19365/2022

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4. The Defendant-3 (3^rd party auction purchaser) filed their counter along with type set of paper.

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The 3rd defendant mentioned that, he has participated in the E-auction held on 18.04.2023 and declared as successful bidder for the amount of Rs.65,30,000/-. He has paid the 25% of the sale amount within timeframed and sale confirmation letter was also issued by the D/B on 19.04.2023 and remaining payment of 75% also made within time framed. As per the terms and conditions of the auction sale notice the entire sale amount was paid by the auction purchaser. 1% of TDS amount was also paid directly to the Income Tax department on 25.04.2023 and completed the payment as per the terms of Auction sale notice dated 24.03.2023.

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Further, 1st defendant bank has issued the sale certificate on 04.05.2023 and same was registered on 04.05.2023 vide Document No.2148/2023 on the file of SRO Kottaram and sale was completed. Hence, at this stage, petitioner does not have any right to question the completed sale. Moreover, petitioners have not complied the conditional order passed by the Hon’ble High Court within time frame. Initially, DRT also not numbered this Application and finally they have obtained the order from Hon’ble High Court to

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approach DRT for numbering. Petitioner have lost their right of redemption on the date of publication of the Auction Sale notice.

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Further, D-3 denied the property is undervalued and this defendant is only participant. E-Auction sale was conducted in a free and fair manner and there is no procedural violation in conduting the sale alleged by the petitioners and auction sale was perfectly in order and legally valid. Further, 1^st defendant bank has already obtained the order of the Ld. CJM, Nagercoil under section 14 of the Act and Advocate commissioner is about to take physical possession of the property but the petitioners application was numbered and this Hon’ble Tribunal has granted status quo. It is further stated that, the entire sale process is completed and being a bonafide purchaser for valuable consideration this Respondent is entitled to physical possession of the property to be handed over by the 1^st defendant bank. Hence, status quo order may be vacated and application may be dismissed.

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S.No	Date	Description
1	13.04.2023	EMD Payment made byD-3
2	18.04.2023	E-Auction Proceedings
3	18.04.2023	Proofof Payment of remaining 25%
4	19.04.2023	Sale Confirmation Letter
5	19.04.2023	Proofof Payment of Rs.10,00,000/-
6	20.04.2023	Proof of Payment of Rs.10,00,000/
7	24.04.2023	Proofof Payment of Rs.20,00,000/
8	24.04.2023	Proof of Payment of Rs.18,32,200/-
9	25.05.2023	Proof of Payment of 1% TDS
10	04.05.2023	Registered Sale Certificate
11	23.01.2023	Order in W.P.(MD)No.19368 of 2023
12	27.04.2023	Order in W.P.(MD)No.10463 of 2023

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5. On the basis of the above pleadings, the following issues have been framed:

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(i) Whether actions initiated by the Defendant Bank in respect of the schedule mentioned properties under the SARFAESI Act are illegal, void and contrary to the settle principle of Law?

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(ii) Whether the applicant is entitled for relief as claimed for?

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Having heard the parties and after going through the documents produced by the Applicant as well as the Defendants, I find the following:

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This application has been filed under Sec.17 of the SARFAESI Act 2002 by the Applicants praying therein to set aside the sale notice dated 24.03.2023 and subsequent auction sale proceedings dated 18.04.2023 and all further proceedings on the grounds of irregularity.

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The main grounds of the Applicants are that the defendant bank had failed to issue proper and valid demand notice and possession notices as per the Act and Rules. Further possession notice was not affixed in the conspicuous part of the property. On verification of documents filed by the Defendant Bank, I find that, demand notice was issued on 08.11.2017 (D/B typeset page nos.10 to 14) and same was received by the Applicants on 12.11.2017 & 20.11.2017 as it appears from perusal of documents of D/B typeset page no.15.

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Further, I find that, possession notice was issued on 02.08.2018 (D/B typeset page no.16) and same was sent by post on 04.08.2018 (D/B typeset page no.17). The said possession notice was received by 1^st Applicant (D/B typeset page no.18) and possession notice was published in English daily and Tamil daily news papers (D/B typeset of page nos.20 & 21). Thus these documents proved that applicant has received the Demand Notice and Possession Notice. So I find that, applicant has failed to proved that he has not received Demand Notice and Possession Notice. Further, I find that, Defendant Bank has not produce any document showing affixture of Possession Notice, which proves that, possession notice was not affixed in the conspicuous part of the premises, which violates Rule 8(1) of Security Interest (Enforcement) Rules, 2002.

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Further, on verification of documents filed by the Defendant Bank, I find that, bank has not filed any documental proof for paper publication of sale notice and affixture of sale notice in the conspicuous part of the premises though the Auction purchaser has produced the paper publication of sale notice of English version only vide page no.35 of D-3 typeset. As per the Act, two news paper publication is mandatory, one in English and another in vernacular language. So, it is one of the clear cut violation of Rule 8(6) and Rule 8(7) r/w Rule 9(1) of the SARFAESI Act.

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Another ground of the Applicant is that, scheduled property is undervalued and property was sold in throw away price as Rs.65,30,000/- and upset price fixed as Rs.30,00,000/-, while Property’s value is more than crore. On verification of

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documents filed by the Defendant Bank, I find that, defendant bank has not filed any valuation report, while it is mandatory to take valuation of the property before the sale. So, it also violates the Rule 8(5) of the SARFAESI Act.

¶118

Further, I find that, Hon’ble High Court has passed the interim stay order for taking physical possession of the property in CRP (MD) No.1213/2023 and CMP (MD) No.5859/2023 dated 04.05.2023 directing the applicant to pay Rs.21 lakhs to the Defendant Bank and the said conditional order was complied by the applicant on 08.05.2023. But, on perusal of records, I find that, while this stay order was in opration the Defendant Bank obtained the order of Ld. CJM on 05.09.2023 and advocate commissioner’s notice was also issued for taking physical possession of the property which amounts to violation of courts order.

¶119

In view of the above discussions, I find merit in the Application filed by the Applicant. Respondent Bank has violated the Rule 8(5), 8(6) 8(7) & 9(1) of the SARFAESI Act, so the sale held on 18.04.2023 in pursuance of sale notice dated 24.03.2023 and subsequent proceedings are illegal and not in accordance with law. Hence, issue nos.1 & 2 are decided in favour of the Applicant.

¶120

In the result, this SA No.576/2023 stands allowed with no cost on the following terms and directions :-

¶121

(i) The Sale notice dated 24.03.2023 issued by the Defendant Bank and sale held on 18.04.2023 is found to be not in accordance with law as there is a violation of Rule 8(1), 8(5), 8(6), 8(7) & 9(1) of Security Interest (Enforcement) Rules, 2002 and hence, the same is set

¶122

SA No.576/2023

¶123

aside and consequently said sale certificate is also set aside.

¶124

(ii) All the expenditure incurred on the issuance of sale notice dated 24.03.2023 and conducting of sale shall not be included to the loan account of Applicant.

¶125

(iii) The Defendant Bank is directed to refund the entire sale consideration amount paid by the Auction purchaser along with 4% of interest from the date of deposit of money by the Auction purchaser till the refund.

¶126

(iv) The Defendant Bank is at liberty to recover the loan dues, if any, after adjusting the amount paid by the applicant in compliance of conditional order along with Registration charges incurred by the Auction purchaser from the Applicants, in accordance with law.

¶127

(v) The Registry is directed to inform the concerned SubRegistrar (Kottaram) about this order so as to cancel the registration of the Sale Certificate document No.2148/2023.

¶128

All the pending IAs are also hereby closed.

¶129

(Dictated to Assistant, taken down, transcribed, typed by him, corrected and pronounced by me in the open court this the 21^st October, 2024.)

¶130

Sd/- (SEEMA SINHA) PRESIDING OFFICER

¶131

Order uploaded on 29.10.2024

P Chandirakala v. Karnataka Bank Limited

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P Chandirakala v. Karnataka Bank Limited

Case brief

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